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 However, the euro recovered from a dip that followed the acrimonious
breakdown of talks on Monday night, as investors took the view that
both sides would climb back from the brink.
If there is no deal on further financing this month, Greece could
face a bank meltdown and run out of money as early as March,
possibly becoming the first country to leave the euro zone or issue
a parallel currency.
French Finance Minister Michel Sapin aired a compromise plan to let
Greece run a smaller budget surplus and said reaching a deal was
largely a matter of phraseology, since there was consensus that
there would be no write-off of Greek debt.
"It's a problem of wording, although the legal tool cannot be
anything else than an extension of the (bailout) program," he told
reporters.
Greek Finance Minister Yanis Varoufakis, who stayed in Brussels for
a routine EU finance ministers' meeting on other issues, dismissed
the argument that his only option was to ask them to extend a
bailout his government was elected to scrap.
"We will continue to deliberate, in order to enhance the chances and
actually achieve a very good outcome for the average European,"
Varoufakis said, pledging an "honorable solution".
Deputy foreign minister Nikos Chountis voiced "cautious optimism".
But with impatience between seasoned Eurocrats and the radical
novices from Athens mounting, he slammed the EU for sticking to its
key demand: "We don't accept blackmail proposals, ultimatums about
extending the bailout."
Jeroen Dijsselbloem, the Dutch finance minister who chairs the
Eurogroup of 19 countries using the common currency, stuck to his
guns, saying Athens must seek an extension: "It's really up to the
Greeks. We cannot make them or ask them. We stand ready to work with
them, also (over) the next couple of days."
HONOR
Varoufakis's talk of "honor" reflects how far arguments are partly
about semantics, important to both sides as they try to save
political face. But some of his partners accused the new government
of failing to grasp the gravity of the situation or put forward
coherent proposals in writing.
"It is troublesome that Greece has twice explained its goals orally,
but no written presentation has been given yet," said Finnish Prime
Minister Antti Rinne, one of the euro zone hawks.
Time is running short and investors marked down Greek stocks and
bonds after Monday's debacle, some saying the risk of Greece exiting
the euro had risen.
Three-year government bond yields rose more than a point to 19
percent, highlighting how far Athens remains unable to fund itself
at manageable interest rates on the markets.
"The Greek government must shift its position," Austrian Finance
Minister Hans Joerg Schelling said. "Time is pressing."
Dijsselbloem has said Friday is a deadline for a deal that would
allow time for some national parliaments to ratify it before the
expiry on Feb. 28 of the 240 billion euro credit package that
rescued Greece from bankruptcy three years ago.
"CRUNCH TIME"
From Britain, the biggest EU state not using the euro, finance
minister George Osborne said "we're reaching crunch time for Greece
and the euro zone" and warned failure to reach a deal would be "very
severe for economic and financial stability".
In Greece, however, novice Prime Minister Alexis Tsipras and his
team continue to enjoy strong public backing after years of cutbacks
demanded by international creditors. Much of the media reported
Varoufakis's angry narrative of events on Monday.
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The Greek minister said that Dijsselbloem, a close ally of hawkish
German Finance Minister Wolfgang Schaeuble, had quashed a proposal
from EU economics commissioner Pierre Moscovici that Varoufakis had
been willing to accept.
"Yielding to Schaeuble and circumventing Moscovici's draft, which
Athens was ready to sign, the Eurogroup blackmails Greece with an
extension," Greek daily Efimerida Ton Syntakton said.
Dijsselbloem dismissed the uproar over conflicting drafts leaked by
the Greek delegation. Wording could be massaged to assuage political
sensitivities, he said, but that ultimately Greece must seek funds
with strings attached.
Moscovici also denied any divisions among Greece's partners, saying
there had been no "good cop, bad cop" strategy in the floating of
various draft agreements. "We are all united, we all think a
solution is possible," he said. "There is no Plan B."
EURO SLIPS
Money is streaming out of Greek banks and Greeks are holding off
paying their taxes, adding to pressure on public finances and the
banking sector if international money dries up.
The European Central Bank's governing council will review on
Wednesday how long it can continue emergency funding for Greek banks
after it stopped accepting Greek government bonds as collateral
earlier this month. A failure of the debt talks could lead to the
imposition of capital controls.
Austria's Schelling said the EU was waiting for figures on cashflows
from Greece to make decisions. While insisting he saw no Greek exit
from the euro, he echoed EU complaints that Athens may not be taking
the situation seriously enough.
"We are ready for a dialogue," he said. "But for that you need a
partner who is willing and able to have this dialogue."
The Greek government says it is others who are deaf to its view that
austerity has spread poverty and wrecked its economy.
Investment bank Barclays said the breakdown of talks had raised the
risk that Greece would leave the euro zone and raised the prospect
that Tsipras would have to call a referendum on whether to accept a
deal with strings or ditch the euro.
Chris Scicluna of Daiwa Capital Markets said the failure raised the
risk of a "disorderly conclusion". But he added: "All is not lost
and we see no need for panic just yet."
EU leaders who met Tsipras at a summit last week have made clear
they want ministers to sort out Greece's financial needs. However,
leaders could meet again if the impasse deepened to the detriment of
the continent's economy.
(Additional reporting by Adrian Croft, Robert-Jan Bartunek, Robin
Emmott, Francesco Guarascio, Jan Strupczewski, Tom Koerkemeier and
Barbara Lewis in Brussels and Jeremy Gaunt, Angeliki Koutantou and
Deepa Babington in Athens; Writing by Alastair Macdonald; Editing by
Giles Elgood and Paul Taylor)
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